Foreign Relations of the United States, 1969–1976, Volume E-15, Part 2, Documents on Western Europe, 1973–1976, Second, Revised Edition

379. Memorandum From Secretary of the Treasury Simon to President Ford¹

Washington undated.

SUBJECT

• Italian Economic Program

I sent Under Secretary Ed Yeo to Rome last week for quiet talks with Prime Minister Andreotti and other Italian Ministers. Yeo told Andreotti that if the Government of Italy were willing to put together an economic program, the U.S. would act as a “facilitator” with the International Monetary Fund to develop a program for IMF financing. In this event the U.S. would be anxious to provide any and all help possible.

Andreotti told Yeo he believed his government could proceed with such a program. He accepted Yeo’s offer to work closely with the Government of Italy and with the IMF in developing the specifics.

Yeo made clear that the program would have to be a “daring” and politically demanding one. It would need to hold down the rise in wages, to cut the expenditures of local governments and to cut the expenditures of the central government. Such a program ought to be psychologically rewarding and helpful in stopping the fall of the lira exchange rate. While the availability of IMF financing would be helpful, if the program were solid there might be no need to utilize it.

Andreotti indicated that the outline of the government effort would be presented to the Italian Parliament in a special report on September 30. He agreed with Yeo that time was critical and that there should be rapid but quiet negotiations with the IMF on the details. He asked whether, in addition to IMF financing, there could be one bilateral credit from the U.S., perhaps for a specific purpose, as an expression of U.S. political support. Yeo made no commitment but said that we might consider such a loan if the Italian program were “daring” and if the IMF were also providing financial and psychological support.

There is still a risk that the Italian effort will fall short of both IMF and U.S. assessments of what will be required to achieve success. Nevertheless, I am extremely encouraged by Andreotti’s willingness to proceed with the effort. Andreotti acknowledged that if the fall of the lira cannot be stopped and the Italians cannot finance a program his government cannot survive. On the other hand, he feels that if the DC can present a good economic program, they can gain a majority support.

1. Summary: Simon reported on Yeo’s discussions in Rome.

   Source: National Archives, RG 59, Records of the Office of the Counselor, Helmut C. Sonnenfeldt, 1955–1977, Entry 5339, Box 9, POL 2 Italy. Secret. Simon did not sign the memorandum. Yeo visited Rome September 24–25 for discussions with Andreotti. In telegram 239558 to Rome, September 27, the Department forwarded a message for Andreotti from Simon on U.S. encouragement, cooperation, and support for the Italian economic program. (Ibid.) In telegram 243153 to Rome, October 1, the Department forwarded a similar message for Andreotti from Kissinger, encouraging “rapid progress” on “a vigorous program.” (Ibid.)